[S]ome publishing industry watchers think that if a deal were to go through, it could lead to an Apple-enabled selling platform that would allow publishers to sell books at a price they determine.

ARRGHHHH!

Sincere apologies to William Gibson for the the title of this blog post, but everything that publishers seem to want from this device that will deliver them from evil is in fact already here.

The iPhone and the iPod (and the Nexus One, the Droid…) are rich multimedia devices capable of full-color, high-resolution display of text, images, and videos, as well as stereo audio. Many of them have GPS built in, along with an always-on web connection, and built in (or easily and freely acquired) social media hooks (email, Twitter, SMS, Facebook…). But most importantly, they feature (drum roll please ……) a platform that allows publishers to sell books at a price they determine. This market is available worldwide, it never closes, and most of its customers are within inches of the registers nearly all of their waking hours (and often beyond). This selling platform requires no inventory, returns are minimal, and sales data is provided nightly.

I’ve heard numbers tossed around suggesting that for some large trade publishers, Amazon represents 70% or more of their ebook sales. That’s a scary situation, but consider that of the top 10 bestselling books on Kindle (as of this writing), exactly the-opposite-of-70% are available in the Books aisle in the App Store, and all at prices significantly higher than on Kindle:

If publishers pushed the price lower on those iPhone Apps, Amazon would quickly decline from 70% of ebook sales (and I would lay odds that those additional app sales would exceed any corresponding decline in Kindle or print sales).

The problem is seriously compounded by the territorial restrictions most publishers face because of the historical approach to acquiring rights. But the Tablet isn’t going to fix that problem — publishing executives are the ones who can deal with that one, especially for frontlist titles. (I accept this is a very, very, very Hard Problem. There’s enormous legacy business and infrastructure, and perhaps more importantly organizational structure and politics to manage. I’m glad I don’t have that problem, but neither does your emerging competition.) Publishing executives must also accept that wishful thinking is not a pricing strategy. If your current cost structures do not permit you to include relatively low-priced mobile ebooks in your product mix (preferably at the same time or before the print version), then your cost structure must change.

But I said this post was about The Tablet.

I should clarify here that I have no actual knowledge of any Apple plans, nor any knowledge of conversations between Apple and publishers beyond what’s already been reported in places like Fortune. So salt this complete and utter speculation to taste, but here goes:

If a tablet is announced on Wednesday, it will run on a variation of the iPhone OS, and include access to the App Store (and the 100,000+ apps within it, including 15,000+ books).

If Apple is talking to publishers, they are playing matchmaker between publishers and developers to help publishers turn their content into apps (including apps designed specifically for the new device). Book-style content is something a lot of people are already expecting to be prominent on this device, and it’s in Apple’s interest to make sure there’s good stuff there at launch, stuff that’s interesting and appealing to a wide audience. For example, I highly doubt that the New York Times just happened to sign up for the iPhone SDK and submit an App to be ready when the App Store launched. Apple must have helped. (Yet no one then claimed Apple was getting into the newspaper business…)

That 30% is non-negotiable, so any give-and-take on this stuff relates to promotion and merchandising. It’s most certainly worth a lot to any App to be featured in a product announcement, TV commercial, or ad campaign, and this device will result in whoppers on all of those fronts.

Apple will almost certainly update iTunes (including the App Store) and that update may well include better merchandising and recommendation features for all apps, including books.

Nothing on that list prevents any publisher from taking advantage of the 50M+ strong market that already exists. While it’s true that creating mobile apps requires software development skills, it’s also true that at one time, creating a web site was considered something that required similar skills, yet somehow publishers seem to have figured that one out along the way. (OTOH, those two skills are merging very fast, especially for book-style content.) There’s of course room for collaboration on developing or adapting open-source alternatives to commercial products.

Of course, building out mobile apps and a presence on emerging and growing platforms and markets (not to mention dozens and dozens of devices and services) is no easy feat, and in the same way that financing a print run and selling into the trade required both capital and a certain set of skills that publishers developed, a new generation of distribution service is on the horizon — though whether existing publishers play a major role in that remains a very open question.

marcus

good post. but doesn’t the 70/30 split (assuming publishers maintain current cost structure) make prices much higher on a potential Tablet v Kindle?

also, curious about your assumption on why ebooks will be apps v for example sold like music in iTunes?

agree, that ultimately the problem is the legacy cost structure.

Mike Scott

@marcus, the 70/30 split makes prices lower on the Tablet than the kindle — the Kindle has a 50/50 split (except they’ve just announced a 70/30 option subject to some rather restrictive conditions).

The App store is not the place for publishers. Publishers don’t have to write iPhone apps. The apps they need already exist — Stanza, eReader, Bookshelf, Kindle, etc.

What publishers need to do is pretty simple. They need to let people sell their books, and they need to let people buy their books. “Buy” obviously precludes DRM; DRMed books are merely rented for an unknown period.

They also need to stop retailers getting delusions of grandeur. Amazon’s 50% cut, and Apple’s 30% cut, should be beyond ludicrous. 5% to 10% is what ebook retailers should be getting, and it’s only publishers’ own timidity that’s letting them get away with more. Just put out your books without DRM at a standard wholesale price, and let the market determine the retail price.

http://www.jeffrutherford.com Jeff Rutherford

@ Mike has a lot of good points.

Also, this constant refrain that the rumored Tablet is going to kill Kindle within months is pretty flawed thinking. Assuming, that the Tablet runs a version of the iPhone OS, I’d be shocked if Apple keeps Amazon Kindle’s iPhone app off the Tablet.

If I’m a current Kindle owner, hmmm should I buy a publisher-version e-book for $20, or should I buy a Kindle version for $9.99, and then I can easily jump back and forth between my Kindle device and Tablet – depending on what device I’m using at the moment. From a personal perspective, I already do that with my Kindle and the Kindle iPhone app, and the sync feature is brilliant. I don’t have to manually search for my place in a book when I jump back and forth between my iPhone and my Kindle.

As Andrew pointed out in his post, the core issue is cost structure. Publishers are jumping through hoops to try and retain $25 average price for a new hardback/ebook – windowed releases, touting the Tablet as a way to increase pricing from Amazon Kindle’s $9.99, etc. Yet, publishers haven’t realized that the pricing structure for their business experienced a seismic shift once Amazon unveiled their $9.99 price point – and gained traction in Kindle sales. Complain, gripe, whine, but your industry’s price structure has changed.

From a business perspective, there’s only a few things they can do.

1. Refuse to release ebook versions – and this may happen much more frequently in the next few years. If a book has a tremendous buzz, will Kindle owners buy the book if it’s clear that no ebook will be released? The inherent risk involved in not releasing an ebook is that you’re pushing Kindle customers towards piracy – finding a PDF of the book online. Can anyone say, music industry.

2. Adjust your cost structure.

3. Try to develop books with multimedia features (Vook) that you can try to command a $20 – $25 ebook price for. But developing that multimedia content involves an added cost – see #2.

@Jeff, number 1 on your list is interesting and given how the ebook market has taken off I personally think there is no turning back anymore. Refusing to release ebook versions will simply punish publishers more than benefit them as consumers increasingly will want to consume books digitally.

Imo, publishers need to try to do number 2 and 3 on your list in a synchronized manner as they move to ebooks. Although the current cost structure indeed is too high and need to adjust, there are probably many untapped extra revenue streams as well and those publishers that can handle both of these areas best will win.

To me, the answer is not necessarily one single product for $20 – $25, but rather a basic one at the accepted price point for $9.99 and several add-on opportunities for a few bucks extra each with higher margins.

http://toc.oreilly.com Andrew Savikas

Great comments here. To be clear, you can extract the content from any of the O’Reilly apps and put it on your other devices (it’s just EPUB). And while our Kindle books are sold without encryption or restriction, the same is not true for most Kindle titles, meaning you’re locked in to Amazon for reading those books.

There’s a lot of enthusiasm among publishers for “enhanced ebooks” but I haven’t seen that enthusiasm where it matters — in the marketplace. It’s also clear that while some segment of customers want a library-style experience, the sales data clearly shows a strong interest in individual apps. I’ve been very surprised to see just how many people are seeking out (and buying) our most technical books as individual iPhone apps, but the sales data is unambiguous on that front, regardless of what anyone here *thinks* readers want.

Jaimee Lee

While I love the idea of a bigger, better platform to read ebooks on, and have anticipated something from Apple for a long time (with drool on my chin even), I don’t think Apple’s table is any sort of second coming the way some folks hope….

@Scott — while you personally may prefer a larger screen, it’s very clear that millions of people are quite happy to read long-form text on a 3.5″ screen. Which perhaps shouldn’t be surprising when you consider how much “reading” we already do on those devices in the form of email, Twitter, IM, texting, Web browsing, etc.

This is movement on a classic Clay Christensen price/performance curve. Mobile reading (currently) performs worse than print when measured by the characteristics we use to define a good print reading experience. But customers are judging mobile reading using different characteristics, such as convenience, Web connectivity, and integration with the rest of people’s media collections.

Again, I personally did not think our traditional programming titles, full of code examples and tables, would be popular as iPhone apps. I was wrong. (In a good way

pond

While I would never say, ‘no serious reading can be done on a small screen,’ after devouring many public domain books on an old Psion, I would take issue with your contention that ‘everything publishers seem to want’ is already available on these small mobile phones.

I don’t see the complex tables and large illustrations of college textbooks being very readable on a 4-inch screen. And I don’t see the publishers of Sports Illustrated or Cosmopolitan being very happy about shoehorning their layouts into that tiny screen.

I can see publishers desiring a lot of things that a big screen makes possible. And preferring a screen size that comes closer to the print pages they are designing now.

Jeff Dickey

Just bear in mind that there are a sizable number of people who don’t have a choice of e-book platform, or don’t have access to any at all. Here in Second World Singapore, we’re cut off from both Kindle readers/content and the iTunes Music Store (but a walled-garden subset of the App Store is accessible). Much as I’d like to be able to read anything I chose, in whatever format I care to, both of those choices are severely constrained here – and the ruler has managed to suborn the educational system to make this one of the most apathetic populations I’ve seen in over 30 countries I’ve visited or lived in thus far. (And Singapore is just concluding a free-trade agreement with the US – from which free access to information is explicitly excluded, I understand).

Americans (often rightly) complain that the corporations have too much influence on national policy, including trade policy. It would be interesting if big-media companies would look around and pick a few countries with de facto closed access to their media, and use their vaunted access to Western governments to effect change.

carsten

an book should not be an app … a reader should be an app but not a book. if you make each book its own app you loose the ability to easily navigate through notes and annotations, plus you loose consistent look and feel. the reason apple works and talks with publishers it to certainly talk about pricing but also move away from the “roll your own” situation that exists on the iphone and to a more consistent platform solution that they envision for the tablet but also the phone

http://www.nouvellesimages.com Jean-Baptiste Blanc

Like most discussions on the subject, it’s mainly looked at from a publisher point of view rather than from an user point of view.
And from a user point of view the situation seems clear to me : book reading on mobile devices of all kinds – some of course already exist – will develop considerably with device price and ebook price stepping down. This will allow people all over the world (and not only in America) to access books when they cannot access them today. It will allow an unimaginably wide distribution for books and so culture. Just look to Negroponte XO-3 tablet project at 75$. Thousands of people who cannot access devices or books today will be able to do it tomorrow. And as says Jeff, they want it. And publishers who will not adapt to this situation will be defeated by new publishers who will sale millions of ebooks at very low prices. Let’s speak again of this in 10 years…

Michael Bhaskar

Andrew – I completely agree with your points re pricing and accept this does have a large impact. However I think the reason the Tablet will be more impactful on publishers is to do with people’s expectations of the device. Most iPhone owners never read a book on it. In fact, they don’t see their iPhone as a reading device at all. However for the Tablet this from the word go will be associated with e-reading and hence the proportion of tablet owners reading will be higher than on the iPhone, to the extent that even though device sales will be lower numbers reading and volumes of books purchased will be higher.

michael thorne

can you say – napster for books anyone!

http://www.smashwords.com/books/view/6806 Alex

Devices come and go–it’s the format that matters. Smashwords e-publishing has my ebook in 10 formats–certainly one for every ereading devices out there. Also, if you buy direct from Smashwords authors get 85% of the royalties. No middle man. No fealty to Apple or Amazon.

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